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Bound to lose, bound to win? The financial crisis and the informal-formal sector earnings gap in Serbia

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  • Niels-Hugo Blunch

Abstract

While the informal sector has received widespread attention in academic and policy arenas in recent decades, knowledge gaps and controversies remain. By examining the incidence and determinants of the formal-informal sector earnings gap for adult male dependent employees using two identical, nationally representative labor force surveys for Serbia—one just prior to the impact of the recent international financial crisis and one about a year into the crisis—for three alternative measures of informality, this paper adds to our understanding in several dimensions. Among the main results is the finding of a substantively large formal-informal sector earnings gap (favoring the formal sector)—across three alternative informality measures—which appears to have decreased substantially overall following the crisis. Additional results suggest that formal sector workers are concentrated in better paying industries and occupations and have more education and other favorable characteristics than informal sector workers, and at the same time also have higher returns to their (already favorable) characteristics overall, with education and part-time status consistently among the main drivers of the observed gap. JEL classifications: I24, J31, J42, J46. Copyright Blunch. 2015

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  • Niels-Hugo Blunch, 2015. "Bound to lose, bound to win? The financial crisis and the informal-formal sector earnings gap in Serbia," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-34, December.
    • Handle: RePEc:spr:izaldv:v:4:y:2015:i:1:p:1-34:10.1186/s40175-015-0035-5
    DOI: 10.1186/s40175-015-0035-5
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    Cited by:

    1. Aysit Tansel & Halil Ibrahim Keskin & Zeynel Abidin Ozdemir, 2015. "Is There an Informal Employment Wage Penalty in Egypt?," Working Papers 976, Economic Research Forum, revised Dec 2015.
    2. Jacek Liwiński, 2022. "Informal employment and wages in Poland," International Journal of Manpower, Emerald Group Publishing Limited, vol. 44(6), pages 1196-1220, January.
    3. Gorana Krstić, 2016. "Why Income Inequality Is So High In Serbia: Empirical Evidence And A Measurement Of The Key Factors," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 61(210), pages 23-46, July - Se.
    4. Aysit Tansel & Halil Ibrahim Keskin & Zeynel Abidin Ozdemir, 2020. "Is there an informal employment wage penalty in Egypt? Evidence from quantile regression on panel data," Empirical Economics, Springer, vol. 58(6), pages 2949-2979, June.
    5. Aysit Tansel & Halil Ibrahim Keskin & Zeynel Abidin Ozdemir, 2015. "Is There An Infırmal Employment Wage Penalty in Egypt?," ERC Working Papers 1508, ERC - Economic Research Center, Middle East Technical University, revised Sep 2015.

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    More about this item

    Keywords

    Formal-informal sector earnings gap; Labor market segmentation; Earnings decomposition; Detailed earnings decomposition; International financial crisis; Serbia;
    All these keywords.

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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